ECONOMY

Deficit ‘below 4 percent’?

Economy and Finance Minister Giorgos Alogoskoufis predicted yesterday that the 2005 budget deficit will be 3.6 percent of Greece’s GDP and, in any case, below 4 percent. In a radio interview, Alogoskoufis also hedged his bets, as revenues have been significantly lagging, having risen just 3.4 percent in the first half of the year against a full-year target of 11.4 percent. Alogoskoufis said that the revenue target in the 2005 budget is an «ambitious» one, but added that the situation with the current budget is not worse than in previous years. Actually, there has never been such a great lag between the revenue target and actual performance, at least in the past decade. Also, in 2004, Alogoskoufis presided over the largest budget deficit in a decade, at over 6 percent of GDP. Although the present government came to power early in March 2004, Alogoskoufis has projected all blame onto his predecessors for last year’s fiscal debacle. While the outgoing government’s estimates for the 2004 deficit were quite optimistic, the present government made it worse when it decided, in a controversial financial audit, to change the way in which defense spending was recorded, in order to score political points over its Socialist rivals. Eurostat, the EU’s statistics agency, reported that just the change in accounting for defense expenditures was responsible for between 25 and 90 percent of the newly reported inflated deficits over the past six years. The cost of the Olympic Games, and arguments over what to actually include as expenditures for the Games, promises to be another long-lasting game of political football, with the present government willing to inflate the figures as much as possible and the opposition Socialists arguing that much of the money spent on infrastructure projects should not be counted as part of the cost. A top government official said yesterday that the cost of the Athens Olympics, already tagged as the most expensive ever, could rise by at least 10 percent to up to 11-12 billion euros «If we calculate spending by local councils and public organizations, the total cost could come to 11-12 billion euros ($13.54 billion-$14.78 billion), up from a previous estimate of about 10 billion euros,» the official told Reuters ahead of the first anniversary of the Games. The official said new costs, which had never been in the original Olympic budget, included hospital upgrades, communications and many labor costs on a range of projects. «Much of the spending by local authorities, hospitals and public entities was not included in the official Games budget,» the official added. The new costs, just submitted by local councils, were not included in Alogoskoufis’s estimate last year that the Games’ total cost was close to 9 billion euros. Asked yesterday what his estimates were now on the total costs, Alogoskoufis told reporters, «When we have the total number, we will announce it.» If the figure of 12 billion euros proves correct, it would be four times the 3 billion euros estimated by the then Socialist government in 2000. The higher Olympic costs pushed up public borrowing in 2004 to 43 billion euros in 2004 from an earlier target of 35 billion. Even before the latest estimate, the Athens Games had cost far more than their 2000 predecessor in Sydney, where spending ran $140 million over the budgeted $2.6 billion. (Reuters/Kathimerini)